SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Aly Rahemtulla and ANR Solutions Inc., Applicants

AND:

John K. Bell, Onbelay Capital Inc., Onbelay Investment Corporation and Onbelay Automotive Inc., Respondents

BEFORE: D. M. Brown J.

COUNSEL: M. Veneziano and M. Lerner, for the Applicants

J. Downing, for the Respondents (by telephone conference)

HEARD: April 10, 2012

REASONS FOR DECISION

I. Motion to change venue of Commercial List application

[1] A dispute has arisen between the two shareholders of Onbelay Investment Corporation – the applicant, Aly Rahemtulla, who indirectly holds his shares through ANR Solutions Inc., and the respondent John Bell, who holds his through Onbelay Capital Inc. Mr. Rahemtulla has commenced this application on the Toronto Region Commercial List seeking injunctive and declaratory relief to prevent his removal by Mr. Bell as one of the two directors of Onbelay Investment at a forthcoming shareholders meeting. Mr. Bell and the other respondents move under Rule 13.1.02(2) of the Rules of Civil Procedure to change the venue of this proceeding from Toronto to Kitchener.

[2] For the reasons set out below I dismiss the motion.

II. The evidence

[3] On this motion Mr. Rahemtulla filed an affidavit. Mr. Bell did not; he relied on his counsel to file an affidavit on his behalf. The evidence about the nature of the dispute between the parties therefore comes from the affidavit of Mr. Rahemtulla.

[4] Although Messrs. Rahemtulla and Bell, through their respective companies, each hold 50% of the outstanding common shares of Onbelay Investment, Mr. Bell personally holds 10,000 Class V non-equity voting shares which provide him with voting control Onbelay Investment.

[5] Onbelay Investment owns an operating company, Onbelay Automotive, which is an automotive e-coater, powder coater and assembler with a plant located in Chatham, Ontario. Onbelay Investment also owned shares in BSM Wireless Inc., a company whose shares are traded on the TSX Venture Exchange, but the materials disclosed some dispute about the extent, if any, of Onbelay Investment’s remaining interest in BSM.

[6] According to Mr. Rahemtulla, the present dispute between the two shareholders centres on a Transition Agreement dated November 1, 2011 amongst all the parties to this application under which, in essence, Mr. Rahemtulla will acquire all of the issued and outstanding shares of Onbelay Investment and Onbelay Automotive from Mr. Bell and his company. The Transition Agreement contemplates payment of the consideration in three tranches, via three dividends, over time, with a change in the control of Onbelay Investment occurring immediately after payment of the second dividend. Payment of the first and second dividends could extend out up to three years from the date of the Transition Agreement. Section 6.1 of the Transition Agreement addresses the issue of the management of the companies pending payment in full of the consideration:

The Parties hereto acknowledge that John will continue to have full voting control of the shares he holds in OIC and OAI until such time as the Second Dividend is paid in full and the transactions contemplated by Sections 4.2 and 4.3 above hereof have been completed.

The Parties also acknowledge that John will continue to have full management and control of the operations of the Business until such time as the Second Dividend is paid in full. John agrees to operate the Business in the normal course of business and a similar fashion as has been operated to date (subject to the terms of this Agreement) and to seek input from Aly in connection with ongoing management and, in particular, issues surrounding union negotiations with the United Auto Workers and MSSC. John will continue to ensure that Aly is kept up-to-date in connection with the affairs and operations of the Business.

John agrees that neither he nor OCI shall withdraw funds from the Business except in accordance with the terms of this Agreement. Aly agrees that neither he nor ANR shall withdraw funds from the Business except in accordance with the terms of this Agreement. (emphasis added)

[7] Article 10.7 of the Transition Agreement requires that any dispute between the parties first proceed through good faith negotiations, followed by mediation, and then arbitration.

[8] According to Mr. Rahemtulla, on February 28, 2012 Mr. Bell told him that he proposed to hold a shareholders meeting at which a resolution would be put forth to remove Mr. Rahemtulla as a director of Onbelay Investment. Mr. Rahemtulla deposed that Mr. Bell has not changed his plans to convene a shareholders meeting for the purpose of removing him. Correspondence between counsel disclosed that Mr. Bell rejected the suggestion made by Mr. Rahemtulla’s counsel to meet in an effort to resolve their differences.

[9] On March 20 counsel for Mr. Rahemtulla reiterated his proposal to Mr. Bell’s counsel that the parties meet “to discuss the implementation of the Transition Agreement in order to avoid the escalation of the parties’ disagreement”, and he stated that his client intended to trigger the dispute resolution provision in section 10.7 of the Transition Agreement “to ensure the implementation of the terms of the Transition Agreement”. That prompted the following March 22 response from Mr. Bell’s counsel:

We remain of the view that there is no need for a meeting between the parties and counsel.

With respect to the remainder of your letter, which appears to contain threats of arbitration and court action, please be advised that it remains our view that our client is not in breach of any agreements between the parties or any obligations under the OBCA. Any litigation that you might commence will be vigorously defended.

[10] According to Mr. Rahemtulla, in a March 22 discussion with Mr. Bell the latter repeated his intention to remove him as a director of Onbelay Investment because of Mr. Rahemtulla’s interference with Mr. Bell’s efforts to secure the chairmanship of BSM and stated that he would co-operate to complete the Transition Agreement only if Mr. Rahemtulla supported him in that regard. While these are only untested allegations of fact made by Mr. Rahemtulla, Mr. Bell elected not to file any affidavit on this motion.

[11] Mr. Rahemtulla wishes to refer to arbitration his dispute with Mr. Bell concerning the implementation of the Transition Agreement.

[12] On March 26 Mr. Bell, in his capacity as secretary of Onbelay Investment, wrote to Mr. Rahemtulla seeking his consent, as a director, to call a shareholders meeting to consider a request by Mr. Bell “to reduce the number of directors on the board of directors from two (2) to one (1) and to elect John K. Bell as the sole director of the Corporation” (the “Requisition Letter”). I should note that Mr. Bell sent the Requisition Letter to Mr. Rahemtulla at three different addresses in Woodbridge, Toronto and Waterdown.

[13] In his Application commenced in this court Mr. Rahemtulla seeks relief which would prevent Mr. Bell from removing him as a director of Onbelay Investment and would appoint an arbitrator to determine the parties’ dispute regarding the Transition Agreement.

[14] The reply affidavit sworn by one of the respondents’ counsel which sought to counter some of the statements of fact made by Mr. Rahemtulla relied on hearsay information from Mr. Bell. Although the Rules of Civil Procedure contemplate the use of some hearsay on motions and applications, it is well established that a court will view with great caution any hearsay statements about contentious matters. Accordingly, I give little weight to the hearsay statements attributed to Mr. Bell.

III. Governing legal principles: Rule 13.1

[15] Unless a statute or rule requires a proceeding to be commenced in a particular county, the applicant may commence it at any court office in any county named in the originating process.[^1] The Practice Direction Concerning the Commercial List, Toronto modifies this principle, to an extent, by providing that:

8. Only Toronto Region matters can be listed on the Commercial List (unless, for special reasons, authorization is given by the supervising judge). Aside from urgent insolvency matters, there should be a material connection to the Toronto Region over and above the location of counsel.

[16] The parties appeared before me at a 9:30 appointment on April 2, 2012. Since the proposed Notice of Application, on its face, stated that Mr. Rahemtulla is a businessperson living in Toronto, Ontario, I authorized the issuance of the Notice of Application on the Commercial List.

[17] The initial choice of venue made by an applicant may be displaced by a respondent bringing a motion under Rule 13.1.02(2) seeking to transfer the proceeding to another county. Rule 13.1.02(2) provides as follows:

13.1.02 (2) If subrule (1) does not apply, the court may, on any party’s motion, make an order to transfer the proceeding to a county other than the one where it was commenced, if the court is satisfied,

(a) that it is likely that a fair hearing cannot be held in the county where the proceeding was commenced; or

(b) that a transfer is desirable in the interest of justice, having regard to,

(i) where a substantial part of the events or omissions that gave rise to the claim occurred,

(ii) where a substantial part of the damages were sustained,

(iii) where the subject-matter of the proceeding is or was located,

(iv) any local community’s interest in the subject-matter of the proceeding,

(v) the convenience of the parties, the witnesses and the court,

(vi) whether there are counterclaims, crossclaims, or third or subsequent party claims,

(vii) any advantages or disadvantages of a particular place with respect to securing the just, most expeditious and least expensive determination of the proceeding on its merits,

(viii) whether judges and court facilities are available at the other county, and

(ix) any other relevant matter.

[18] In Hallman Estate (Re)[^2] I summarized my understanding of the appropriate approach to a change of venue motion as follows:

[29] … While the connection of the venue to the parties and the subject-matter of the dispute are factors to be taken into account in the overall analysis under Rule 13.1.02(2), I agree with the analysis in Eveready that a court should approach the venue issue by weighing and considering each of the enumerated factors in order to determine whether a transfer of venue is desirable in the interest of justice. As echoed by R.S.J. M. F. Brown in Patry v. Sudbury Regional Hospital, [2009] O.J. No. 1060 (S.C.J.):

The law is well established that change of venue motions are fact specific. The current rule makes it clear that none of the enumerated factors are more important than the other and all of those factors and any other factors relevant to the location of the action must be balanced to ensure that a proceeding is transferred from the county where it was commenced only if such transfer is “desirable in the interest of justice”. (para. 13)

Such a holistic approach best reflects the policy choices underpinning the language of the rule.

[19] Or, put another way, Rule 13.1 vests in the plaintiff/applicant the ability to make the initial selection of the venue in which the proceeding will be commenced and heard, subject to any statutory or rule requirement specifying the place of commencement or hearing. Although a defendant/responding party may challenge that choice of venue, the defendant/responding party bears the burden of demonstrating to the court, on cogent and persuasive evidence, either that the venue selected will not provide a “fair hearing”[^3] or that it “is desirable in the interest of justice”[^4] to transfer the proceeding to another county. In the context of considering whether a transfer would be desirable in the interest of justice, a court must be satisfied, following a holistic review of all factors enumerated in Rule 13.1.02(2)(b), that the evidence demonstrates that another county would be a more desirable location, in the interest of justice, for the proceeding than the one selected by the plaintiff.

[20] Common sense dictates that the moving party seeking a transfer must show that another county is more desirable than that selected by the plaintiff/applicant. Simply to point out that some other location would be as desirable would result in a flood of tactical Rule 13.1 motions, thereby driving up the costs of litigation without any benefit to the parties and impeding cost-effective access to this Court.

[21] How much more desirable must the county proffered by the defendant/responding party be than that selected by the plaintiff/applicant? That is a question which really cannot be answered, in any definitive way, in the abstract; there is no “bright line” test. As R.S.J. Brown stated in the Patry case: “The law is well established that change of venue motions are fact specific.” Suffice it to say that a party seeking to transfer a proceeding to a new county must demonstrate, on cogent and persuasive evidence, that such a transfer would be in the interest of justice in the sense that the adjudication of the dispute in another venue would better secure “the just, most expeditious and least expensive determination of [the] civil proceeding on its merits”.[^5]

IV. Analysis

A. Where the events occurred; where damages were sustained; the location of the subject-matter of the proceeding; the local community’s interest: Rules 13.1.02(2)(b)(i) – (iv)

[22] This proceeding involves a dispute between two ultimate shareholders – Mr. Rahemtulla and Mr. Bell. The dispute, as described by Mr. Rahemtulla, centres on the implementation of the Transition Agreement, as influenced by Mr. Bell’s perception that Mr. Rahemtulla did not provide him with adequate support in seeking the chairmanship of the BSM board of directors.

[23] The events of the dispute have no obvious connection to one geographic location in Ontario since at the heart of the dispute placed before this court is a disagreement over the interpretation and implementation of the Transition Agreement. Mr. Rahemtulla takes the position that section 6.1 of the Transition Agreement prevents Mr. Bell from altering the composition of the board of directors of Onbelay Investment pending full performance of the Transition Agreement, and section 10.7 requires their dispute to be sent to arbitration. Mr. Bell’s insistence that an shareholders meeting be held to consider his proposal to reduce the number of directors to himself alone signals that he disagrees with those interpretations of the Transition Agreement. Unlike a proceeding which involves location-specific events, such as an automobile accident, the events concerning this application are not rooted in one obvious location and the subject-matter appears to involve significant elements of contractual interpretation which are not location-specific. I would also note that section 10.7(c) of the Transition Agreement does not specify a particular location in Ontario where the arbitration must be held.

[24] The evidence in support of the venue change motion did not identify who, beyond Mr. Bell, would be providing evidence for the respondents on the injunction application. Having read the evidence filed by both parties, I am left with the distinct impression that the main witnesses will be the protagonists themselves, Messrs. Rahemtulla and Bell, and the court will also have before it some documentary evidence, such as the Transition Agreement, as well as letters and emails passing between counsel stating the positions of the protagonists and various steps which they have taken.

[25] During the hearing respondents’ counsel argued that the respondents would be filing evidence from witnesses other than Mr. Bell. I do not give effect to that argument. Rule 13.1 transfer motions must be decided upon evidence filed by the parties, including evidence concerning the identity of potential witnesses and sources of documentary evidence. A party cannot reasonably expect to create a record for the motion through oral argument; a party is obliged to file proper written evidence to support the positions it intends to advocate at the hearing.

[26] Although the applicants do not assert a damage claim in this application, the applicants do seek relief which, if not granted, arguably would prejudice Mr. Rahemtulla by exposing him to removal as a director of Onbelay Investment. In that sense the injury the applicant contends it might suffer would be an injury suffered in Toronto, the place where Mr. Rahemtulla deposed he lives and works.

[27] As to any local community’s interest in the subject-matter of the proceeding, I see none. This is a dispute between two shareholders, not a dispute about the operations of the Chatham coating plant owned by Onbelay Investment. There was no suggestion in the evidence that the determination of the dispute regarding the holding of a shareholders meeting would have any impact on the workings of the Chatham plant.

[28] In sum, the factors listed in Rules 13.1.02(2)(b)(i), (iii) and (iv) do not point to Kitchener as a more desirable venue to hear this application, while the factor set out in Rule 13.1.02(2)(b)(ii) favours Toronto.

B. The convenience of the parties, witnesses and the court: Rule 13.1.02(2)(b)(v)

[29] The thrust of the respondents’ request to change the venue concerns the residence of the parties. Let me consider this submission in two parts: (i) where do the parties reside? and, (ii) what effect will the parties’ place of residence have on the conduct of the application in the sense of securing the just, most expeditious and least expensive determination of this application for injunctive and declaratory relief?

[30] There is no doubt on the evidence that Mr. Bell resides in Cambridge and his shareholding conduit, Onbelay Capital, has its registered office in Cambridge. The operating company, Onbelay Automotive, has its plant down in Chatham, but the dispute in this proceeding does not involve the operations of that company, rather it concerns the ultimate shareholders at the top of the corporate chain. The company of which the protagonists are shareholders, Onbelay Investment, has its registered office in Cambridge.

[31] Which takes me to the respondents’ main point: they contend that neither Mr. Rahemtulla nor his holding company, ANR Solutions Inc., has any connection to Toronto, so the matter should not stay on the Toronto Region Commercial List. Mr. Rahemtulla deposed that he works in Toronto and since 2009 has lived in Toronto. The respondents submitted, in effect, that I should not believe Mr. Rahemtulla’s evidence on this point.

[32] The respondents submitted that various corporate filings made since 2008 belied Mr. Rahemtulla’s assertion of a Toronto residence and revealed that he actually resided in Waterdown, Ontario. Those filings included (i) several January, 2009 certificates and consents concerning Onbelay Investment; (ii) a January, 2009 consent to serve as a director of Onbelay Automotive, although that consent indicated that his address for service was in Woodbridge; (iii) a March, 2012 printout of the corporate profile report for Onbelay Investment; (iv) a similar printout for ANR Solutions Inc.; and, (v) a March, 2011 Onbelay Investment Management Information Circular. Although Waterdown lies between Burlington and Dundas, a short drive down the QEW from Toronto, the respondents contended that the drive between Waterdown and Cambridge is even shorter - they measured it on Google Maps at 39 kilometres.

[33] Mr. Rahemtulla explained in his affidavit that while his holding company, ANR, does indeed have its registered office in Waterdown, where his parents live, since January, 2009 he has lived in Toronto and conducted ANR’s business out of Toronto. Mr. Rahemtulla deposed that he is the Chief Executive Officer of BSM, operates that company from Toronto, and has met frequently with Mr. Bell in Toronto to deal with the affairs of that company.

[34] The reply affidavit sworn by Mr. Bell’s counsel did not take issue with those assertions by Mr. Rahemtulla, but repeated the contention that many corporate filings show a Waterdown address as one for Mr. Rahemtulla and the Transition Agreement stipulates that notices under it should be sent to Mr. Rahemtulla at an address in Woodbridge.

[35] The respondents argued that Mr. Rahemtulla was under a positive obligation pursuant to the Corporations Information Act, R.S.O. 1990, c. C.39 to provide an accurate address for himself for corporate filings, and since some recent corporation profile reports still show his address as Waterdown, he may have committed an offence under that Act, the implication being that the court should not believe Mr. Rahemtulla’s evidence that he resides in Toronto. I do not accept that submission. Section 2(1) of the Corporations Information Act requires an OBCA corporation to file an initial return setting out the prescribed information as of the date of filing. The prescribed information includes “the names and addresses for service of the corporation’s directors, including municipality, street and number, if any, and postal code.”[^6] The Act imposes on a corporation further obligations to file annual information returns which must indicate whether there has been a change in the information set out in the notice that the corporation most recently filed under the Act,[^7] as well as notices of change “for every change in the information filed under this Act”.[^8] As can be seen, the Act requires disclosure of a director’s address for service, not the place of the director’s residence.

[36] As to the listing of Waterdown as Mr. Rahemtulla’s place of residence in the 2011 BSM management information circular, there is no evidence in the record about Mr. Rahemtulla’s role in providing that information or whether its inclusion resulted from simple clerical oversight.

[37] Moreover, the focus of the analysis on a Rule 13.1.02 motion must be on the proceeding before the court and the appropriateness of the applicant’s selection of the venue for the hearing of that proceeding. A person’s place of residence may be far less important in such an analysis than the place where the person works. Since courts tend to be shut during night-time hours, of more relevance than nocturnal residence is the place of day-time work. There is simply no dispute on the evidence that Mr. Rahemtulla works in Toronto.

[38] Neither party filed evidence on the motion suggesting that viva voce evidence will be required to adjudicate the application, so the hearing will involve a written record. The convenience of affiant witnesses therefore is not a consideration.

[39] Finally, as noted above, the March 26 Requisition Letter sent by Mr. Bell to Mr. Rahemtulla listed three addresses for Mr. Rahemtulla – Waterdown, Woodbridge and Toronto.

[40] By way of summary, I accept that Mr. Bell conducts his business from Cambridge, with frequent trips to Toronto. I also accept that Mr. Rahemtulla conducts his business in Toronto – his evidence on that point was not contradicted. I further accept that Mr. Rahemtulla presently resides in Toronto, but in recent years has used a Waterdown address as his address for service for some corporate filing purposes. Since the two shareholders most likely will be the primary witnesses in this proceeding, the factor concerning the convenience of witnesses is equally balanced. Also, this will be an application argued on a written record. The affiants can be cross-examined in the locations where they live or work; there will be no need for witnesses to travel to the hearing.

C. Existence of counterclaims, etc: Rule 13.1.02(2)(b)(vi)

[41] Respondents’ counsel acknowledged that this factor did not apply in the circumstances of this case.

D. Advantages/disadvantages of a location; availablity of judges: Rules 13.1.02(2)(b)(vii) and (viii)

[42] Respondents’ counsel filed an affidavit deposing that commercial matters, including injunctions, routinely are heard at the Kitchener Courthouse and “ample time” exists to deal with the applicants’ request for an injunction because the parties have agreed that the shareholder meeting will not occur until May 9, 2012. I have no doubt about the general scheduling capacity of this Court sitting in Kitchener to hear contested commercial injunction applications,[^9] but the more pertinent issue is whether a hearing for this particular application can be scheduled in Kitchener prior to early May. The respondents did not provide any evidence on that point, notwithstanding my specific request for such scheduling information at the 9:30 appointment last week. By contrast, I know that scheduling capacity presently exists on the Commercial List to deal with this application before the scheduled May shareholders meeting. Consequently, Kitchener does not provide any advantage over Toronto in terms of scheduling. In addition, given that this case has all the hallmarks of a highly contested shareholder dispute, I think the availability of 9:30 appointments on the Commercial List provides greater flexibility in ensuring the degree of judicial supervision that this proceeding most likely will require.

E. Other relevant matters: the Toronto Region Commercial List Practice Direction: Rule 13.1.02(2)(b)(ix)

[43] Finally, the Commercial List Practice Direction requires that a matter on the List have a material connection to the Toronto Region. Unlike the decision in Albrecht v. Kulkarni[^10] where Cumming J. found that there was not “any Toronto component to [a] dispute”, this case more closely resembles the situation in Jinah v. Kassam[^11] where Farley J. stated:

In this case however one of the applicants is located in the Toronto Region. It would not seem that any person looking at this matter objectively would be able to pinpoint any other Region (or location within that Region) as being the natural location for a hearing; this is particularly so when there are connections with three other Regions. In other words, the preponderance of the connections is not with any one Region.

[44] In any event, the location in Toronto of one of the two protagonist shareholders in a shareholders’ dispute establishes a sufficient material connection to the Toronto Region for purposes of the Practice Direction.

F. Conclusion

[45] Taking into consideration all of the factors enumerated in Rules 13.1.02(2)(a) and (b)(i) – (ix), they do not combine to point to Kitchener as a more desirable venue in which to hear the applicants’ proceeding – two protagonists are involved; they live in different cities; the applicant has selected the city in which he lives and works; there is no indication that persons apart from the protagonists will be giving evidence; and, the record before the court will be a written one. I conclude that the evidence does not support any reason to displace the original choice of the applicants to commence this proceeding in Toronto. A material connection exists with the Toronto Region given that Mr. Rahemtulla resides and works in Toronto, and the Commercial List is able to accommodate the quick scheduling and on-going management this application requires.

[46] For these reasons I dismiss the respondents’ motion to transfer the hearing of this application to Kitchener.

V. Costs and other matters

[47] I heard cost submissions at the end of the hearing. The applicants submitted that in the event they successfully resisted the motion, the respondents should pay their costs fixed at $2,000.00. The respondents submitted that in the event they lost the motion, there should be no order as to costs because Mr. Rahemtulla was at fault for creating an ambiguity about his place of residence. I see no reason why the applicants, as the successful parties, should not receive their costs. There was no ambiguity that Mr. Rahemtulla worked in Toronto and Mr. Bell did not file an affidavit contesting that Mr. Rahemtulla lived in Toronto, a fact of which I have no doubt would lie within his knowledge.

[48] The respondents shall pay the applicants within 30 days their costs of this motion fixed at $2,000.

[49] The parties shall consult on a hearing date for this application, as well as on a schedule for all pre-hearing steps. The parties shall book a 9:30 appointment before me for a date no later than next Wednesday, April 18, at which time I will fix the date for the hearing, as well as set the schedule. Mr. Downing may participate in the 9:30 appointment by conference call if he wishes.

(original signed by)____

D. M. Brown J.

Date: April 11, 2012

[^1]: Rule 13.1.01(2); Pearsall Estate (Re), 2009 CanLII 25140 (ON SC). [^2]: 2009 CanLII 51192 (ON SC). [^3]: Rule 13.1.02(2)(a). [^4]: Rule 13.1.02(2)(b). [^5]: Rule 1.04(1). [^6]: R.R.O. 1990, Reg. 182, s. 1.1(1)4. [^7]: CIA, s. 3.1(1); Reg. 182, s. 2.4 ¶7. [^8]: CIA, s. 4(1). [^9]: Hallman, supra., paras. 46 et seq. [^10]: 2004CarswellOnt 3890 (S.C.J.) [^11]: [1997] O.J. No. 3760 (Gen. Div.), para. 7.